British Prime Minister David Cameron and Burmese opposition leader Aung San Suu Kyi has issued a call for the suspension of sanctions against the state.
Cameron also met Burma's reformist President Thein Sein as he became the first Western leader in decades to visit the country, which languished for decades under military rule until last year.
The British premier announced a dramatic shift in stance on sanctions following Suu Kyi's recent election to parliament, calling for all measures except the arms embargo to be suspended.
Britain, Burma's former colonial ruler, has traditionally taken a hardline stance on sanctions because of human rights concerns.
The 27-nation European Union already lifted some restrictions against Burma, also known as Myanmar, this year and foreign ministers will decide the next steps when they meet on 23 April.
Speaking on the tarmac as he arrived in the new capital Naypyidaw, Mr Cameron said: "This country really matters. For decades it has suffered under a brutal dictatorship. It is also desperately poor. It doesn't have to be this way.
"There is a government now that says it is committed to reform, that has started to take steps, and I think it is right to encourage those steps."
He said the government had to demonstrate that moves to democracy were "irreversible".
Mr Cameron said developments in Burma may be "one potential chapter of light" in a "world where there are many dark chapters in history being written".
"Of course we should be sceptical. Of course we should be questioning. Of course we shouldn't be naive," he said.
But he added: "Aung San Suu Kyi herself, who has spent so many years in such a long, lonely but powerful struggle, believes that he is acting in good faith."
Britain had played a "leading role" in the imposition of sanctions, and would also not be "backwards" in responding to positive changes, he added.
